I envy not Google employees who get these benefits. I envy Larry Page and Sergey Brin for founding and building a company that is capable of offering these types of benefits.
Google can afford to a) self-insure and b) afford modestly higher policies at the upper end without a physical and possible reject (my insurance agent was "only" willing to go up to about a million before they started asking questions), but they're not uniquely capable in this regard.
It's a nice benefit, but it's on the same extravagance level as providing free coffee.
It also says that purchasing life insurance is a cheaper alternative than building the required savings to cover the family's financial burden after losing the main breadwinner.
The report was written by Swiss Re.
You say tens of dollars. You are taking pains to indicate how little it costs, so I suppose that means at least $20. If you started at (say) the age of 30, it doesn't much matter about the rate in the next 10 years - what matters is the next 45 years or so. By the time you are 75, what will the rate be? And what proportion of 5 years salary will it pay out?
Insurance agencies are not charities, nor do they pay your salary; they operate on a for-profit basis. The insurance agency is not going to offer you a deal that loses them much money on average. If they never raise the rate and you die promptly at 75, you have only paid in $10,800 (aka $2,160/yr for 5 years, which is a pittance). Since they hold the money they make some interest, but if they pay out much more than you paid in (since they do still have to pay their own bills) they don't break even, and they can't survive if that is the usual case.
They are going to have to dramatically raise your rates, or pay much less at the end, or make it less likely that the benefits will be paid out. More likely all 3.
So I am skeptical that the relationship of a Google employee to their death benefits is really comparable to your relationship with your insurance agent.
I think that slurgfest was trying to point out the flaws in the following kind of reasoning:
- A man buys a term insurance policy at age 30
- The policy that costs $20/month
- After 45 years, the total cost would be $20 x 12 x 45 = $10,800
- If the man dies at age <= 75, the policy pays out $500,000
- The average life expectancy in the US is 75 years (Wikipedia)
No company could offer a policy like that, right? There's a 1 in 2 chance that the insurance company will pay $500K but will only have received fees of $10K.
If the scenario I've described is possible, could you--or anyone--please explain why the insurance company wouldn't go bankrupt?
Do you understand that the "term" in "term life insurance" is a very, VERY important detail? If you carry the term out to where there is an actuarial likelihood (or certainty!) of death, then yes, term life insurance does get radically more expensive. If you cover a) someone's working career or b) someone's expected career with a particular company, term life insurance remains quite inexpensive.
The incentive structure of your deal with the insurance agent is that he is trying to get more money out of you than you will get paid out.
The incentive structure of your deal with Google is that you have a benefit for staying.
Retirement is really another issue.
Otherwise, it's not comparable